NZ gets anti-migrant foreign minister

Prime Minister Helen Clark has retained power in New Zealand with a deal clinched by making outspoken, anti-migrant populist Winston Peters her new foreign minister.

Clark today announced the formation of a new centrist government, one month after voters gave her Labour Party the most seats in parliament, but 11 short of a majority.

She will serve a record third term thanks to deals including giving the nationalist Peters the foreign affairs portfolio outside cabinet, in exchange for his NZ First party supporting a minority Labour government in parliament.

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Clark wrapped up deals with four minor parties in all to continue her hold on power, first won in 1999.

"I have every confidence that these arrangements which we have been working on slowly and carefully for a month now are durable and will enable us to offer a strong and stable and progressive government for the parliamentary term ahead," she said.

Peters, a Maori, is a 27-year veteran of politics and former deputy prime minister known for his anti-immigration views and protectionist policies.

His elevation comes despite being voted out by his electorate in last month's election, but retaining a seat in parliament under the country's mixed-member proportional (MMP) system.

Last year Peters warned of an immigrant invasion which would turn New Zealand into an "Asian colony" and this year complained Muslim extremists were being allowed in the country.

Opposition National Party leader, Don Brash, said Peters was a poor choice for the job.

"It's astonishing not just for the New Zealand public but the whole region distrusts Winston Peters -- Australia, Asia, countries of Asia which he's been critical of in recent years," Brash told reporters.

"I think putting him as minister of foreign affairs does huge damage for our international reputation."

Clark said Peters' views on foreign policy were "very similar" to those of Labour.

However, issues of refugees and foreign trade would not be part of Peters' responsibility, she said.

Peters has supported government policy on retaining an anti-nuclear policy, and opposing New Zealand troop involvement in Iraq and Afghanistan.

The Australian government said it would work with whoever is New Zealand's foreign affairs minister.

But international relations expert Terence O'Brien said Peters' views on immigration would create a negative impression among Asian neighbours, while excluding the foreign minister from cabinet would have disastrous effect on the country's international relations.

Also outside cabinet will be the minister of revenue, a post occupied by minority party United Future's Peter Dunne.

The biggest loser from the deal-making was the left-wing Green Party, which campaigned to be part of a coalition with Labour but stays out in protest at Clark's alliance with NZ First and the centrist United Future.

The Greens instead signed a cooperation agreement with Labour to abstain on votes which could bring down the government in exchange for some policy concessions.

"Many of the policy and budgetary demands that Labour has accepted from NZ First and United Future are socially, economically or environmentally destructive," co-leader Rod Donald said.

Clark's arrangements give her at least 61 votes in the 121-seat parliament on confidence and money supply votes.

Brash said the onus was on Clark to hold the coalition together.

"I will be leading a vigorous opposition committed to promoting policies which are of benefit to all New Zealanders, and opposing policies which cater to narrow sectional interests," he said.

Labour won 50 seats to National's 48 in the September 17 election.

The Maori Party and the right-wing ACT party were also excluded from the support arrangements.

In addition to foreign affairs, Peters was given the racing portfolio and is associate minister for senior citizens.

Dunne, also named associate minister for health, said he would endeavouring to get a more attractive business tax system than Australia's.

The Progressive Party's one MP, Jim Anderton, remains as a cabinet minister in coalition with Labour.